Journal
REVIEW OF ECONOMICS AND STATISTICS
Volume 97, Issue 1, Pages 166-179Publisher
MIT PRESS
DOI: 10.1162/REST_a_00447
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Funding
- Agriculture and Food Research Initiative-National Institute for Food and Agriculture, USDA
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We examine variety pass-through effects that occur when multiproduct retailers adjust the length of their product lines in response to changes in wholesale prices. Studying variety pass-through is essential to understanding how wholesale price changes transmit into retail prices when variety is endogenous. Using data from the ready-to-eat breakfast cereal category, we find that retailers jointly adjust retail prices and the length of their product lines in response to changes in wholesale prices. We show the importance of controlling for the endogeneity of retailers' product line decisions when calculating price pass-through rates.
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